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The Effects of Social Security Taxes and Minimum Wages on Employment: Evidence from Turkey

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  • Kerry Papps

    (Nuffield College)

Abstract

sing worker-level panel data for Turkey, this paper analyses the separate employment effects of increases in the social security taxes paid by employers and increases in the minimum wage between 2002 and 2005. Variation over time and among low-wage workers in the ratio of total labour costs to the gross wage gives rise to a natural experiment. Regression estimates indicate that a given increase in social security taxes has a larger negative effect on the probability of a worker remaining employed in the next quarter than an equal-sized increase in the minimum wage. Those who retain their jobs in the next quarter also experience a larger reduction in working hours when social security taxes increase than when the minimum wage rises. This is consistent with a situation in which workers increase effort in response to an increase in wages. Men, rural-dwellers and those under 30 are found to have the strongest overall disemployment effects in response to increases in labour costs.

Suggested Citation

  • Kerry Papps, 2010. "The Effects of Social Security Taxes and Minimum Wages on Employment: Evidence from Turkey," Koç University-TUSIAD Economic Research Forum Working Papers 1017, Koc University-TUSIAD Economic Research Forum.
    • Handle: RePEc:koc:wpaper:1017
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    References listed on IDEAS

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    Cited by:

    1. World Bank, 2008. "Investing in Turkey's Next Generation : The School-to-Work Transition and Turkey's Development," World Bank Publications - Reports 8084, The World Bank Group.
    2. Sibel Cengiz & Afsin Sahin, 2014. "Modelling nonlinear behavior of labor force participation rate by STAR: An application for Turkey," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 7(1), pages 113-127, April.
    3. Betcherman, Gordon & Daysal, N. Meltem & Pagés, Carmen, 2010. "Do employment subsidies work? Evidence from regionally targeted subsidies in Turkey," Labour Economics, Elsevier, vol. 17(4), pages 710-722, August.
    4. Mustafa Utku Özmen, 2020. "In Pursuit Of Understanding Markups In Restaurant Services Prices," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(06), pages 1423-1437, December.
    5. Meltem Dayioglu & Müşerref Küçükbayrak & Semih Tumen, 2022. "The impact of age-specific minimum wages on youth employment and education: a regression discontinuity analysis," International Journal of Manpower, Emerald Group Publishing Limited, vol. 43(6), pages 1352-1377, March.
    6. Üngör, Murat, 2014. "Some thought experiments on the changes in labor supply in Turkey," Economic Modelling, Elsevier, vol. 39(C), pages 265-272.
    7. Belman, Dale. & Wolfson, Paul J., 2016. "What does the minimum wage do in developing countries? : A review of studies and methodologies," ILO Working Papers 994893283402676, International Labour Organization.
    8. Mr. Christopher S Adam & Mr. Edward F Buffie, 2020. "The Minimum Wage Puzzle in Less Developed Countries: Reconciling Theory and Evidence," IMF Working Papers 2020/023, International Monetary Fund.
    9. Sotomayor, Orlando J., 2021. "Can the minimum wage reduce poverty and inequality in the developing world? Evidence from Brazil," World Development, Elsevier, vol. 138(C).
    10. World Bank, 2008. "Turkey - Country Economic Memorandum : Volume 2. Sustaining High Growth, Selected Issues," World Bank Publications - Reports 8017, The World Bank Group.
    11. Işık Enes & Orhangazi Özgür & Tekgüç Hasan, 2020. "Heterogeneous effects of minimum wage on labor market outcomes: A case study from Turkey," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-41, March.
    12. Adriana D. Kugler, 2019. "Impacts of Labor Market Institutions and Demographic Factors on Labor Markets in Latin America," IMF Working Papers 2019/155, International Monetary Fund.
    13. Alfredo Pereira & Jorge Andraz, 2012. "Social security and economic performance in Portugal: after all that has been said and done how much has actually changed?," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 11(2), pages 83-100, August.
    14. H. Lehmann & A. Muravyev, 2012. "Labor Market Institutions and Informality in Transition and Latin American Countries," Working Papers wp854, Dipartimento Scienze Economiche, Universita' di Bologna.
    15. Selin Pelek, 2015. "The Employment Effect of the Minimum Wage: An Empirical Analysis From Turkey," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 4(1), pages 49-68, January.
    16. Guney, Ibrahim Ethem & Hacihasanoglu, Yavuz Selim & Tumen, Semih, 2017. "Consumer Loan Response to Permanent Labor Income Shocks: Evidence from a Major Minimum Wage Increase," IZA Discussion Papers 10751, Institute of Labor Economics (IZA).
    17. Alfredo M. Pereira & Jorge M. Andraz, 2014. "On the Long-Term Macroeconomic Effects of Social Security Spending: Evidence for 12 EU Countries," CEFAGE-UE Working Papers 2014_08, University of Evora, CEFAGE-UE (Portugal).
    18. Neumark, David & Munguía Corella, Luis Felipe, 2021. "Do minimum wages reduce employment in developing countries? A survey and exploration of conflicting evidence," World Development, Elsevier, vol. 137(C).
    19. Yusuf Soner Baskaya & M. Utku Ozmen, 2013. "Turkiye’de Asgari Ucret–UFE Enflasyonu Iliskisi Uzerine Ampirik Bir Analiz," CBT Research Notes in Economics 1323, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    20. Abdullah Selim Öztek, 2021. "Minimum Wage Effects under Informality: Evidence from Turkey," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 35(2), pages 98-136.

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    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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